Technical View: Nifty forms bullish candle; be cautiously optimistic, keep stoploss at 10,020
Bulls staged a smart comeback on Monday after sharp sell-off last week. The Nifty50 after gap up opening extended rally as the day progressed and closed above 10,250 levels, driven by short covering in banking & financials after ICICI Bank’s Q2 earnings.
All sectoral indices closed in the green with Pharma rising the most (up 5.2 percent) followed by Bank, Financial Service, IT, Metal and Realty which gained 2-3 percent.
If the market is able to sustain above 10,000 levels then it may head towards 10,400 levels in coming sessions, but one should be cautiously optimistic and keep a strict stoploss below 10,020 levels, experts suggest.
The Nifty50 after opening higher at 10,078.10 extended rally as the day progressed and touched an intraday high of 10,275.30 in late trade. The index almost recovered all its previous week’s losses and closed 220.90 points higher at 10,250.90, forming large bullish candle on the daily charts.
“Finally there seems to be some respite to bulls as Nifty50 clocked in a gain of around 2 percent before signing off the session with a long white day kind of formation. However, this rally appears to be driven largely by the financials on the back of short covering,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
He said hence, sustaining above Monday’s low of 10,020 levels this much awaited pull back rally can initially head to test its first critical hurdle placed in the zone of 10,408 to 10,436 levels.
Albeit it looks like a short term bottom is in place, as similar strength in the early part of October series was met with selling pressure, he advised traders to adopt a cautiously optimistic stance and should maintain a tight stop for long positions below 10,020 levels.
In case this strength gets extended beyond 10,450 levels then this pull back swing shall eventually expand up to 10,700 levels, Mazhar said.
India VIX moved up by 2.48 percent to 19.71 levels. Volatility is not cooling down further and that is the only concern for the market, experts said.
On option front, maximum Put OI was seen at 10,000 followed by 10,200 and 9,500 strikes while maximum Call OI was seen at 11,000 followed by 10,500 strikes. Put writing was seen at 10,200 followed by 10,000 strike while minor Call writing was seen at 10,400 followed by 10,200 strike.
“The Nifty negated its formation of lower highs – lower lows of last three sessions and gained by around 220 points. It formed a bullish candle at its crucial support of psychological 10,000 zones and managed to recover the losses made in last three sessions,” Chandan Taparia, Associate Vice President | Analyst-Derivatives, Motilal Oswal Financial Services said.
He further said the index has seen a positive divergence with mechanical indicators and is turning from its deep oversold territory.
Now it has to continue to hold above 10,180-10,200 zones to extend its bounce towards 10,333 then 10,450 levels while on the downside support exists at 10,180 then 10,138 levels, he added.
Bank Nifty opened positive and witnessed buying interest throughout the session towards 25,000 zones. The index closed 538.65 points higher at 24,959.70.
The index formed a Bullish candle on a daily chart which implies that bulls are back to the market near to the major support zones, Taparia said.
Now it has to hold above 24,650 to extend its gains towards 25,250 then 25,500 levels while on the downside major support is seen at 24,500 zones, he added.